If you are good with numbers, you’ve already got a head start on starting a profitable business. How do we know? Well, number one on our list of most profitable small-business industries is accounting and tax, with a huge 18.4% profit margin. Next is real estate businesses with 12.2%, law firms with 14.5% and doctor’s offices with 13%. This is according to Sageworks, a data service that studied the net profit of more than sixteen thousand small businesses between 2014 and 2015.
Why are these services profitable? Simple, they depend largely on human capital.
According to Sageworks analyst Jenna Weaver, “Service industries are frequently present on the most profitable small-business list. This is mostly due to lower overheads and start-up costs. You can start the majority of these industries from your house.”
While profit is one major motivation for entrepreneurs, other factors need to be considered before starting the business. These factors include the sort of training or licensing required, whether the firm is in line with your skills, and how the venture would cope in a period of a recession.
Below is a list of the most profitable small businesses, and their net profit margins.
1. Accounting, Bookkeeping, Payroll Services & Tax Preparations: 18.4 percent
“The accounting industry is consistently a top performer on our list,” says Sageworks’ Weaver. Even if the state of the economy looks extremely bad, it doesn’t stop people needing the services of accountants. Another major plus to this industry is that it has repeat clients, and little overhead cost.
2. Management of Companies & Enterprises: 15.5 percent
This industry comprises of small, privately-owned businesses of bank holding organizations and other forms of holding firms. Some good examples of reputable holding firms (although they don't fall under the category of small businesses) include Carl Icahn’s Icahn Enterprises, and Warren Buffett’s Berkshire Hathaway.
3. Offices of Brokers & Real Estate Agents: 15.19 percent
This is another type of small business that is highly profitable, and less demanding to start up. Although the state of the economy has an influence on real estate, it also has low operating costs. All that is needed to start is a brokerage license or an agent.
4. Automotive Equipment Leasing and Rental: 14.55 percent
With the steady rise of the on-demand economy, Sageworks analyst Libby Bierman talks about the likelihood of people renting and leasing more cars, using on-demand services such as Zipcar, along with other traditional rental services such as Hertz.
5. Legal Services: 14.48 percent
If you have ever hired a lawyer, you will know it’s never cheap. Law business is somewhat similar to accounting, in that it has repeat clients and a small operating cost. Lawyers are not the only people in this business sector, as settlement officers (they handle the transaction of securities), notaries and title search agents in real estate fall into this category.
6. Dentists: 14.41 percent
Dentistry is similar to medicine and surgery, and there are tons of benefits to enjoy from rendering this service. While the cost to start this venture is quite expensive - dental equipment is costly - the profession has the edge of attending to several patients at a time, which results in more profit.
7. Electric Power Generation, Transmission, and Distribution: 14.02 percent
Power is something that adds meaning to our general well-being. Without electricity, life would be boring, and most companies would suffer greatly from the lack of power. This is why power generation is so profitable.
This sector of small, privately owned electric power firms goes beyond conventional fossil fuel power electricity, and extends to hydroelectric, solar, nuclear, geothermal, wind and many more.
8. Lessors of Real Estate: 14.01 percent
For clarity, lessors are also called landlords. Real estate is also a great way of making money as a small, privately owned business. Renting out either residential or non-residential property is a lucrative venture, but you will have to wait a while to regain the money spent on building or purchasing the property.
9. Offices of Other Health Practitioners: 13.30 percent
You may be asking that what difference there is between this category and physicians. There is no real difference between them. There is a census presentation between optometrists, chiropractors, podiatrists and mental-health providers - who fall into the category of “offices of health practitioners” - and the different kinds of physicians.
10. Offices of Physicians: 13.01 percent
Physician’s offices are also one of the most profitable businesses for small, privately-owned individuals. But this does not come cheap as there are many requirements needed to become a doctor - years of intensive training, different certifications, and medical school costs outstanding. Having said that, doctors also benefit from repeat patients and relatively little overhead costs.
11. Commercial and Industrial Machinery and Equipment Rental and Leasing: 12.58 percent
Renting or leasing is a very lucrative business. It can offer returns of up to five times the initial cost of the property being rented out, after some years. Some renting or leasing services are more profitable than others; machinery and equipment leasing is certainly one of the most lucrative.
12. Religious Organizations: 12.41 percent
Faith-based organizations are enjoying maximum profit all around the world. The fact that their major objective is not making money doesn’t stop them from profiting. What matters most is how the profits are distributed. Instead of giving the profits to shareholders, you channel everything into the organization’s mission, which is to keep the church growing and expanding. It’s been a great year not only for synagogues, churches, mosques, temples, and monasteries but also for colleges, universities, and schools being run by religious organizations.
13. Management, Scientific and Technical Consulting Services: 12.05 percent
These are great businesses that highly sought after by most organizations. There is tons of work available on freelance sites, with reasonable pay attached to them. Management and consulting services are gaining more recognition every year, and the rate at which people seek these services is impressive. The services provided by these organizations include marketing, human resources, and environmental issues.
14. Specialized Design Services: 11.4 percent
For any business to be successful, it needs to have a unique brand. You can hire freelancers to give your business a distinctive design. There are also small businesses that specialize in industrial and interior designing, and are doing great. Appearance and design play a crucial role, which is why design services appear on our list of most profitable small businesses.
15. Office Administrative services: 11.3 percent
Office administrative services are the core of business operations across a wide range of industries - from a restaurant, to the office of a physician - and provide day-to-day admin services such as financial planning, record keeping, and billing. It would be rare for you to find an office administrator without a job, and the pay attached to the job is on the increase.
The main aim of venturing into any business is to make a profit. Although this is true, there are some other factors to consider before starting any business. Do you have the skills that match the business? What sort of training is needed to be successful in it? And how would the business fare during a recession? These are the questions you need to ask.
If you know of any other lucrative businesses to add to the list, feel free to add them in the comment box below.